If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
The military in Iraq wasn’t the only thing surging in 2008. Mortgage fraud also reached a new high last year, according to the FraudBlogger Index. Federal investigators have identified an increase in frauds and schemes in the real estate business as well.
Mortgage fraud activity that might have otherwise gone undetected was uncovered as falling home prices and rising defaults pushed these crimes to the surface,” said MortgageDaily.com Publisher Sam Garcia. “Although Fraud is being uncovered at an increasing pace, the actual level of fraud on more recent originations has likely tumbled as production has dwindled and lenders have tightened guidelines.”
FraudBlogger reports that more than $5 billion in mortgage fraud cases were tracked during 2008. That’s up from $4 billion in 2007. Quarterly activity more than doubled in the fourth quarter over the previous quarter and was nearly 300 percent higher than the fourth quarter in 2007.
The ten states experiencing the most mortgage fraud in the final quarter of 2008 were:
- California with $1,095,840,000
- New York with $374,334,000
- Florida with $344,634,286
- Minnesota with $208,300,000
- Nevada with $101,200,000
- Virginia with $77,213,822
- Texas with $70,000,000
- Colorado with $50,800,000
- Ohio with $41,469,500
- Pennsylvania with $40,800,000
California jumped to the to the top of the list followed by New York, a newcomer to the top ten ranking. Much of California’s increase was tied around 11,000 mortgage fraud investigations reported by the U.S. Attorney in San Francisco.
In addition, special agents with the Internal Revenue Service (IRS) Criminal Investigation division investigate mortgage fraud. These agents an uniquely equipped to investigate such fraud and similar illegal activities because they are skilled financial investigators whose mission is to “follow the money” and collect evidence to prove applicable tax or money laundering violations. Once the investigation is complete, the IRS agents forward their investigation to the Department of Justice for criminal prosecution, if such a prosecution is warranted. The IRS can also take civil action if a criminal case is not warranted.
According to the IRS, 349 investigations were initiated during 2008, a slight increase over the 2007 level of 337. Recommended prosecutions increased more substantially to 263 in 2008 up from 217 the previous year. Indictments and informations experienced the greatest increase rising by more than 100 to 255 in 2008. There were 136 convictions reported in 2008 compared to 130 the year before. The number of sentences pronounced and the overall incarceration rate both declined in 2008 to 104 sentences and an incarceration rate of 82.7 percent. The number of average months served grew to 38 from 35, however that is still lower than the 47 months handed out in 2006.
Some of the common types of real estate fraud schemes identified by the IRS are:
- Property Flipping – a buyer pays a low price for a property then resells it quickly for a much higher price. While this may be legal, it becomes a criminal act when it involves false statements to the lender.
- Two Sets of Settlement Statements – One settlement statement is prepared and provided to the seller accurately reflecting the selling price of the property. A second, fraudulent, statement is given to the lender showing a highly inflated purported selling price. The lender provides a loan in excess of the property value, and after the loans are settled, the proceeds are divided among the conspirators.
- Fraudulent Qualifications – Real estate agents assist buyers who would not otherwise qualify by fabricating their employment history of credit record.
Several mortgage fraud prosecutions have been widely publicized already in 2009. The most recent is the announcement last week by federal prosecutors and reported by the Associated Press (AP) that Christopher J. Warren of Sacramento was being charged in a mortgage fraud and investment scheme spanning Arizona, California, Florida, Illinois and at least one other state and totaling an estimated $100 million. Nor is it just new prosecutions that are being seen. The New York Law Journal reports that attorney Alexander M. Kaplan or Brooklyn, NY was recently convicted on 18 counts including conspiracy and bank, mail and wire fraud related to a subprime mortgage scam. He is scheduled to be sentence May 1, 2009. In Ohio, four people were convicted and sentenced last week in what the Columbus Post Dispatch calls “the largest mortgage fraud case ever prosecuted in central Ohio.”
Along with mortgage fraud, foreclosure fraud is also showing signs of growth as the economy slows and more homeowners find themselves struggling.
Last 3 posts by Jay Hammond
- Mortgage modification law threatens right to representation in California - July 15th, 2009
- How Cities & States are coping with foreclosure - July 10th, 2009
- Freddie Mac educates borrowers via YouTube - July 9th, 2009
Related posts:
Loading ...